Correlation Between American Eagle and China Resources
Can any of the company-specific risk be diversified away by investing in both American Eagle and China Resources at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining American Eagle and China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Eagle Outfitters and China Resources Beer, you can compare the effects of market volatilities on American Eagle and China Resources and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in American Eagle with a short position of China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and China Resources.
Diversification Opportunities for American Eagle and China Resources
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and China is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer and American Eagle is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on American Eagle Outfitters are associated (or correlated) with China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of American Eagle i.e., American Eagle and China Resources go up and down completely randomly.
Pair Corralation between American Eagle and China Resources
Assuming the 90 days trading horizon American Eagle Outfitters is expected to under-perform the China Resources. But the stock apears to be less risky and, when comparing its historical volatility, American Eagle Outfitters is 1.17 times less risky than China Resources. The stock trades about -0.07 of its potential returns per unit of risk. The China Resources Beer is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 294.00 in China Resources Beer on November 4, 2024 and sell it today you would earn a total of 4.00 from holding China Resources Beer or generate 1.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Eagle Outfitters vs. China Resources Beer
Performance |
| Timeline |
| American Eagle Outfitters |
| China Resources Beer |
American Eagle and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and China Resources
The main advantage of trading using opposite American Eagle and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, China Resources can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in China Resources will offset losses from the drop in China Resources' long position.| American Eagle vs. CARSALESCOM | American Eagle vs. Geely Automobile Holdings | American Eagle vs. East Africa Metals | American Eagle vs. De Grey Mining |
| China Resources vs. CNVISION MEDIA | China Resources vs. ANTA SPORTS PRODUCT | China Resources vs. Virtus Investment Partners | China Resources vs. Keck Seng Investments |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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